Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Fed Vice Chairman Clarida Backs Gradual Rate Hikes

Economy Nov 27, 2018 09:20AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Bloomberg. Richard Clarida Photographer: Andrew Harrer/Bloomberg

(Bloomberg) -- Federal Reserve Vice Chairman Richard Clarida said the central bank’s gradual approach to interest-rate hikes is appropriate as U.S. monetary policy gets closer to its optimal longer-run setting.

“As the economy has moved to a neighborhood consistent with the Fed’s dual-mandate objectives, risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago,’’ Clarida said at The Clearing House and Bank Policy Institute’s annual conference in New York on Tuesday.

Gradual rate increases allow the Fed to “accumulate more information from the data about the ultimate destination for the policy rate and the unemployment rate at a time when inflation is close to our 2 percent objective,” he said in the text of his remarks.

Faced with a slowing global growth outlook, some softening in U.S. housing and business investment, Fed officials are trying to communicate how incoming economic data will shape the path of monetary policy over the next year. Fed Chairman Jerome Powell is scheduled to speak in New York on Wednesday.

In his remarks, Clarida said the Fed is updating its estimates of the “uncertain” neutral policy rate and an unemployment rate consistent with stable prices “as new data arrive.” Even so, rates are “much closer to the vicinity” of neutral than when the Fed started its rate-hiking cycle in December 2015.

Uncertainty Ahead

The Fed’s rate hikes have been predictable over the past year, coming once a quarter since December 2017. U.S. central bankers will raise the benchmark lending rate for a fourth time this year when they meet Dec. 18-19, according to futures markets that are pricing in about a 76 percent probability of a quarter-point hike.

After that, however, investors are becoming skeptical about the median forecast of Fed officials in September for three additional hikes in 2019. Clarida’s speech indicated that incoming economic reports will be critical to the Fed’s pace for next year, which could be more challenging for growth.

While the world’s largest economy is robust by most measures, some signs of slowing have emerged recently, including a weaker housing market and capital expenditures that bolstered growth earlier this year. Orders at U.S. factories for non-military capital goods, excluding aircraft, were weak in October for a third straight month.

Clarida, who joined the Fed in September, sounded a note of caution over a slowdown in the amount businesses invested in equipment and software in the third quarter. “One data point does not make a trend, but an improvement in business investment will be important if the pickup in productivity growth that we have seen in recent quarters is to be sustained,” he said.

Clarida’s comments come at a time when price gains are running right around the Fed’s inflation goal.

“While my base case is for this pattern to continue, it is important to monitor measures of inflation expectations to confirm that households and businesses expect price stability to be maintained,” he said.

Clarida said inflation expectations in the University of Michigan’s survey are within the range consistent with price stability but at its lower end, and that a market-based indicator points to the Fed’s preferred price gauge “running at somewhat less than 2 percent.”

(Adds comments on inflation in final two paragraphs.)

Fed Vice Chairman Clarida Backs Gradual Rate Hikes

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email